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Commission approves Greek plan to protect primary residence

The European Commission said on Thursday it has accepted Greece’s plan to protect the primary residencies of debtors who cannot repay their mortgage loan.

“The Commission concluded that, with respect to individuals, including those performing an economic activity, the measure does not involve any state aid,” it said in a press release.

In its assessment, the Commission said that while the banks that issued the loans will have an indirect advantage because it will increases the amount of repayment these banks are likely to receive from the non-performing loans, the aid will not create “undue distortions of competition” because it is limited to what is necessary to ensure that borrowers do not lose the house in which they live.

It also said that since all banks in Greece will participate in the scheme, it is non-discriminatory.

“The Commission has therefore concluded that the scheme is well-targeted and limited in time and scope as required by EU rules,” it said, adding that the plan is expected to contribute to the reduction of non-performing loans in the banking sector.

The scheme has an annual budget of around 132 million euros and sets strict eligibility criteria in terms of the value of the primary residence and income of the borrower.

Eligible borrowers will receive a grant corresponding to 20 percent to 50 percent of their monthly loan payment depending on their income. If the borrower stops servicing its loan, it is foreseen that the bank can initiate the foreclosure of the property.